Zacks Picks Three Emerging Market ETFs That Offer Play On Domestic Demand

By Reshma Kapadia

One of the problems with investing in emerging markets is that the universe of options readily available to US investors are heavy on export-oriented firms. (Think about the energy companies that make up the bulk of the Russian market or Vale and Petrobras’ large chunk of the Brazilian market). As a result, funds tracking the broader indicies don’t always give investors the type of exposure to domestic demand stories they may want at this stage of the emerging markets story.

Using data from the World Bank on household final consumption expenditures as a percentage of GDP, Zacks Investment Research highlights three markets it thinks are skewed toward domestic demand and and insulated from global events.

The three ETFs representing markets that get 75% of its GDP from household final consumption:

Market Vectors Egypt Index(EGPT) “From a sector perspective, financials do take up a big chunk of assets, followed by telecoms and basic materials. However, large caps account for just over half the assets, so the product should have a pretty hefty tilt towards pint sized securities,” Zacks ETF strategist Eric Dutram writes. The fund is up 38% this year.

iShares MSCI Philippines Investable Market Index Fund(EPHE) — Real estate and banks make up about 30% of the fund, which is up 41%.

iShares MSCI Turkey Investable Index Fund(TUR) — Just under a half of the fund’s assets are in banks but the next few sectors are consumer-oriented, he writes. The fund is up 50% this year.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.